A few years ago, my then-preteen daughter became obsessed with eating at Cracker Barrel. If she had eaten at one before, she did not remember. That isn’t because her parents have anything against Cracker Barrel, we do not – we are both 100 percent Southern, and I won’t speak for my wife and her family, but I am at least half country.

I tell you this to make sure it is understood that as far as we are concerned, restaurants don’t get any better than a good Southern “meat-and-three.” We were not keeping our daughter away from Cracker Barrel on purpose; there just isn’t one convenient to us, and we would drive by two or three local meat-and-threes to get to one of the chain’s locations. So, we promised that the next time we were on a family road trip, we would skip the usual drive-thrus and have lunch or dinner at a Cracker Barrel.

We found one off Interstate 85 in South Carolina. Both our son and daughter understand my feelings on how to judge a good meat-and-three. There may be many options on the menu, but the test is one of two things:  Option one is country fried steak with collard greens and mashed potatoes. (Pro tip, in Texas they would refer to it as chicken fried steak; don’t ask why, obviously steak doesn’t come from a chicken, but this only scratches the surface of things that don’t make sense in Texas.) Option two would be the vegetable plates, and yes, macaroni and cheese is considered a vegetable in any respectable meat-and-three. Also, don’t worry about being healthy…if cooked correctly, Southern vegetables are vegetables in name only.

I don’t remember what my children chose on that evening, but I went with the country fried steak, and it was not good. My children now swear they will never eat in a Cracker Barrel again. I know what you are going to say, “The one by us is good.” I have heard that before, and that is the problem with Cracker Barrel and many other restaurant chains: One location is good, but another one isn’t. I even spoke to one Cracker Barrel regular whose daughter has worked at the one near her. Her daughter gave her the inside scoop: there were basically two teams of cooks. The A team was great, but the B team was meh. This is a lack of consistency caused by a failure of training and management.

Enter Julie Masino, the CEO brought in to turn Cracker Barrel around. She came from Taco Bell. The teens love Taco Bell, and I don’t believe it degrades my status as a meat-and-three connoisseur to admit to having made the “run to the border” on multiple occasions. I’m not sure if Masino came up with that catch phrase, but her degree is in communications, not restaurant services or hospitality…which may explain why the most-noted move in her attempted turnaround of Cracker Barrel was to change the logo. What Cracker Barrel needed, in her view, was to refresh the branding.

Branding is not what made my country fried steak taste like cardboard or caused the collard greens to taste like lawn clippings, and branding didn’t put the lumps in my mashed potatoes. Branding did get my young daughter to want to give Cracker Barrel a try, but the poor quality of the location we visited is what assured that she won’t be back.

In fairness to Masino, she is certainly not alone. We live in a branding world. Everything today is branding, right down to the individual who promotes his/her brand on social media. Our world has become so fake that even our intelligence is artificial.

This brings us to Anthony Fauci, the face of our response to the Covid pandemic. He refused to answer any questions in the Senate hearing, but his diary release speaks volumes. He is the government official most responsible for pandemic response, and what was on his mind? January 6, 2020: “I got invited to a ‘Super A list’ party.” March 8: “Nice profiles of me in Politico and The New York Times today.” March 26: “Donuts are being named after me; T-shirts have my picture on them.” April 7: “Press still hot and heavy about me.” People were dying, and his deepest thoughts were about his brand.

Fauci isn’t alone. Congress has turned into one big performative circus wherein our elected leaders are far more concerned with going viral than with doing the hard work of leading. What would have been gained by that hearing if Fauci had talked? A few viral moments of him and his nemesis, Senator Rand Paul, going at it for clicks and likes.

If the pandemic proved anything, it is that our leadership lacks the maturity and substance to truly lead in times of crisis when leadership is most needed. This explains in a large part why so many young people have fallen under the sway of extremists on both the right and the left; those extremists have principles, they have substance. It may be evil, but at least it is real and not just branding. No wonder young people who support the Democratic Socialists of America (DSA) are not worried about the party’s desire to eliminate the Senate, if the biggest thing actually happening in the Senate is a hearing about a pandemic that ended six years ago.

Cracker Barrel is not just a brand, it is a restaurant chain. If they want to improve business, then improve the consistency of the food quality and the service – the actual core of what you are – first, then get the message out. I don’t want to seem too harsh on branding, because one could have the greatest store in the world and it won’t matter if no one knows about it. We need marketing, we need to build brands, yes; however, we cannot forget that it is the substance that counts. The best brands are authentic; they reflect the actual substance of their core business. If you want to be a good meat-and-three, then you better know how to fry a steak; one bite and no one will care what your logo looks like. At least that is my perspective.

Warm regards,

Chuck Osborne, CFA

~Cracker Barrel and Fauci

“Why The Global Economy Will Begin To Collapse In Eight Days” – This headline greeted me in my Substack feed upon my return from a family vacation. Unfortunately, by the time I saw the article it had been 14 days since it was published. I was too late. After 30-plus years of prudently investing my clients’ assets, the global economy collapsed while I was drinking mango margaritas at a pool bar in Tulum, Mexico. I simply cannot apologize enough.

Fortunately for us all, no one has seemed to notice. The next article in my feed might give us some insight into why: This one, authored by Mark Manson, was titled, “Intellectuals are F*cking Idiots.” If it is not obvious as to why these two articles are related, then please bear with me.

The end-of-days story sells; It has since the beginning of human history. I believe it feeds our ego to think we will be the last humans. Manson’s article is worth reading. He relays the story of Malcom Caldwell, a professor at London University and a brave Marxism apologist well into the late 1970s, even after the publishing of “Gulag Archipelago” and the world knowing of the horrors of socialism. In 1978, Professor Caldwell had the opportunity to meet Pol Pot, whom he believed would finally bring about Marx’s full vision.  After the meeting, Pol Pot had him executed. Reality hits hard sometimes.

Manson goes on to the example of Paul Ehrlich, with whom I am far more familiar. Ehrlich is the author of “The Population Bomb,” which came out in 1968 and predicted the end of the world due to overpopulation. Ehrlich, a celebrated biologist and hero to the environmental movement, predicted mass starvation in the 1970s and that the oceans would be void of life by 1980. He predicted all sorts of catastrophes, none of which occurred. Being spectacularly wrong never dissuaded Ehrlich. In 2004, long after every single prediction of his 1968 book had proven wrong, he claimed that his only real error was being too optimistic. He passed away in March of this year, and as recently as 2024 he was given a platform by “60 Minutes.” Ehrlich is the personification of George Orwell’s quote, “One has to belong to the intelligentsia to believe things like that: no ordinary man could be such a fool.”

Manson’s conclusion is that these intelligent people fall in love with their models and at some point can no longer tell the difference between their model and reality. He states, “All models are wrong, some are useful.” That is what inspired me. I doubt Manson has ever read “Security Analysis,” the landmark work of Benjamin Graham and David Dodd. It is the bible of investment management, and it is both longer and harder to read than the Bible itself.

Yet, somehow Manson, who to my knowledge has no financial training, perfectly summed up the entire first lengthy chapter of Graham and Dodd in one concise sentence: “All models are wrong, some are useful.” Humility is the number-one ingredient to sustainable investing success.

This brings us back to me missing the end of the world. That article was written by Porter Stansberry, an investment adviser. In fairness to Stansberry, he makes a useful insight: The world does not run on oil, precisely; it runs on diesel. The war in Iran has certainly sent shocks through all energy markets, but especially the diesel market. This is having and will continue to have economic ramifications. The one thing the doomsayers always miss, however, is human ingenuity and resilience: What they see as the end of the world, someone somewhere sees as an opportunity.

When given the freedom to act, humans always find a way to overcome obstacles and make their lives better. As my colleague Michael Smith is fond of saying, “The bears always sound smarter.” They have a complex line of reasoning that somehow seems to make sense, even when it is totally wrong. That takes a great deal of intelligence. So, you really do have to be intelligent to believe things that are stupid. Optimists are left with “It will all work out, guys.” That isn’t satisfying, even though it is almost always correct.

The end of the world is a popular story, but it is bad trade. Fortunately, the world did not actually collapse while I joined my family on vacation. I doubt I will live long enough to see it happen, but if I do, there would be worse ways to go out than sipping a mango margarita at a pool bar in Tulum. At least that is my perspective.

Warm regards,

Chuck Osborne, CFA

~I Was on PTO on Doomsday

Rule one: When you realize you have made a mistake, don’t make it worse. That seems like such an easy concept, but it is so hard in real life. It is our nature to fixate on the original mistake instead of dealing with where we are now. This happens in investing all the time: An investor makes a mistake like investing at the wrong time only to see their investment lose value, and then they turn it into two mistakes by selling at the very worst time.

I fear we may be in one of those situations with the war in Iran. It is rightfully the biggest story today. People are focused on the horrors of war; on the high cost of gas as a result of the war; on whether the administration was right to get us into this war in the first place. They focus on how much money each bomb costs. All of these things are valid; however, there may be more at stake.

Well-known hedge fund manager Ray Dalio wrote a very insightful article in Substack, “It All Comes Down to Who Controls the Strait of Hormuz: The “Final Battle”.” He reminds his readers of some important history. In 1956 the British, French, and Israelis invaded Egypt. Israel invaded first with the intention of reopening the Strait of Tiran from an Egyptian blockade. The British and French then joined Israel with the larger mission of overthrowing Egypt’s president Gamal Abdel Nasser and regaining control of the Suez Canal.

Although initially militarily successful, the British and French eventually caved to international pressure from the United States, the Soviet Union, and the United Nations to leave, and the Suez Canal remained a nationalized asset of Egypt, giving Egypt significant influence in international trade. The ultimate failure marked the end of these once great European powers as the primary powers in the world, and the recognition of a new world order with the United States and the Soviet Union as the two superpowers dividing the globe.

If this current crisis ends with Iran controlling the Strait of Hormuz, it will have devastating impact on the credibility of the United States as a superpower in our world. While there are some who think this would be a good thing, I would argue that they are naïve. We are far from perfect, but to not understand that the United States is and has been a beacon of light in an otherwise dark world is to be willingly ignorant of human history.  

Do I protest too much? Our military is superior to any other in the world. There is no way we lose this, right? I am a proud graduate of Culver Military Academy. When I was there in the 1980s, our military instructors were all Vietnam veterans. They taught one lesson I will never forget, simply by asking a question: “How do we lose a war without losing a single battle?” Militaries win wars, but politicians lose them.

Starting this war may have very well been a huge mistake, or maybe it wasn’t. Ultimately history will decide that, but for the sake of argument, let’s just say it was a mistake. That mistake has been made and it cannot be undone. We desperately need adults who understand that. We need leaders in Congress who want to do something more important than go viral on social media, and we need an established media that understands that this isn’t a game of gotcha. Unfortunately, we have neither.

Ultimately, our leaders are a reflection of us. Do we reward immature behavior? Are we glad when our elected officials allow TSA employees to go unpaid and travelers to have their lives disrupted just to make a political point that they had already won? Do we applaud when our representative lands some childish zinger in what is supposedly a working committee meeting, which derails any actual work but makes for great online entertainment? Are we still a serious nation that understands that we live in a serious world?

If we are, then we will understand that even if we disagree with the action in Iran, we know that success is of vital importance to the world. We can let our disagreement be known in the upcoming election and work to ensure similar mistakes are not made in the future. However, we must deal with today for what it actually is and not what we hoped it would be. We are in this now, and we had better win it. At least that is my perspective.

Warm regards,

Chuck Osborne, CFA

~Turning One Mistake into Two

The Supreme Court in 1964 ruled on the suppression of a French film that the state of Ohio had deemed obscene and therefore banned. The question was, did this French film rise to the level of pornography? Asked to define pornography, Justice Potter Stewart delivered what has become a famous statement:

“I shall not today attempt further to define the kinds of material I understand to be embraced within that shorthand description [“hard-core pornography”], and perhaps I could never succeed in intelligibly doing so. But I know it when I see it…”

“I know it when I see it.” This is also many people’s definition of evil, which has been on my mind over the past few weeks. Evil comes in myriad shapes and forms. Obviously, we have the war with Iran. I’m sure you have seen and read the same articles I have. Some say it is justified; some say that it isn’t. I will freely admit that I don’t know, and that there are unfortunately too many who should admit such, yet instead use whatever platform they have to preach uninformed opinions. The fact is that history will be the true judge of the wisdom of this action. But I think we can all agree that the regime in Iran – the world’s biggest sponsor of terrorism for the last 47 years and murderer of its own people just in the past few months – is evil.

This week I witnessed evil closer to home, and this we have more control over. One of our retired clients called me in a panic Monday evening: she was on the phone with someone who claimed to be with the Federal Trade Commission (FTC). The individual on the other end of the line was telling her that her Charles Schwab account had been tampered with, and that to secure it, she needed to transfer $200,000 immediately. She was on the other line with this gentleman when she called me, and I asked her to connect us. I will give this guy points for commitment to the scam, as he suggested to her that I could be the one who hacked her account. Fortunately, it was that comment that convinced our client that she was talking to a scam artist.

What kind of person preys on confusion to steal from retirees? Evil.

This kind of evil is easier to protect ourselves from. Know that no government official is going to call and demand that you immediately transfer funds. When in doubt, check it out; anything legitimate will allow you to follow up. Schwab offers the following five steps to help safeguard yourself from scams:

> Always verbally verify money movement instructions with the recipient and ask for supporting documentation.

> Perform your own due diligence. Research the recipient/product/person to validate the legitimacy of the request or search for scams/complaints associated with the other party.

> Use appropriate disbursement channels/methods to make payments. Avoid prepaid debit cards, gift cards, and digital currency.

> When you can, view goods in person, pay after services are completed, and send money only to people you’ve met in person.

> Use services that have purchase protection and/or an escrow service, especially for high-dollar transactions.

> (Source: https://www.schwab.com/schwabsafe/security-knowledge-center)

I would add to that list to always use your trusted adviser. Our client thought she had called Schwab to get her tax information, but the crooks on the other end of the phone pretended to be Schwab and told her she had to contact the FTC via a number they provided. We could have gotten her tax information for her, but she “didn’t want to bother us.” Of course I assured her that was ridiculous, that servicing her account is part of our job; she knows she can trust us, so please, always call us.

There is evil in this world. Some of it is big, far away, and out of our control. It is easy to get caught up in those stories when we too often miss the evil that is right in front of us, which is smaller in scale but nonetheless real, and more importantly, something we can actually help prevent.

Evil is hard to define, but I know it when I see it. We would have less of it in the world with a different regime in Iran and closer to home with fewer scam artists. At least that is my perspective.

Warm regards,

Chuck Osborne, CFA

~Evil Closer to Home

“People should stop training radiologists now. It’s just completely obvious that within five years, deep learning is going to do a better than radiologists.”  ~ Geoffrey Hinton aka “The Godfather of AI”

Does that scare you? Would it scare you less if you knew that quote is more than a decade old, and that out here in the real world there are more radiologists today than there were then? Hopefully so, but this knowledge has not stopped the AI elite from continuing to make such claims. Elon Musk recently predicted the end of surgeons because his AI enabled robots will be better at surgery than a human being within three years. Are you looking forward to being operated on by a robot?

Dario Amodei, CEO of Anthropic, published a very lengthy essay in January about the dangers of AI, which include the usual science fiction threats (think “Terminator”). Fortunately for us, Amodei does not think the machines will decide to eliminate mankind…at least not on purpose. That is a relief.

He does think AI will destroy all the jobs on the planet, making human beings worthless (at least economically). He claims that AI is different than technology of the past. When agriculture was automated, the workers could simply move into factories. When factories were automated, the workers could move toward technology and service jobs. He claims that there will be nowhere to go with AI, because AI and AI-empowered robots will do everything, and they will do everything better than humans.

This is horrifying. It is also wrong. I will freely admit that Amodei knows far more about AI than I do, but his economics and knowledge of human nature seem lacking. First, he suffers from what we in investing refer to as hindsight bias: It may seem obvious today that when farm workers were replaced by machines they would just move into the factories, because that is what happened, but I doubt it was obvious at the time. The automation of agriculture began with the invention of the cotton gin in 1794, while Henry Ford invented the assembly line and with it modern manufacturing in 1913.

It was not obvious then what the next level of employment would look like, and it never is. Humans, if given the freedom to do so, always invent new ways to add value to society anytime they become unburdened by the old. What will human employment look like when AI is fully up and running? I have no idea, and neither does anyone else, but if economic history tells us anything, it tells us that the future is bright. The only thing that can stop that future is the very heavy-handed policies that Amodei thinks are necessary.

We wrote about this in 2009 in the 4^th quarter issue of our Quarterly Report newsletter, “Jobs.” There is a reason capitalism works best in countries with strong faith traditions. Capitalism itself requires faith.

Amodei and the other AI doomsayers also make another major mistake: The question for society is not what AI will be capable of, but what how AI will actually be used. Harvard professor and author Clayton Christensen’s 2011 book, “Disruptive Innovation,” showed how real disruption does not come from cutting-edge technology, because technology always exceeds its utility to the average user.

I was reminded of this just the other week. Michael Smith and I went to record our latest podcast and were suddenly blocked by our IT department from accessing the website of the application we use to do so. The application had been upgraded with “AI” to make it easier to edit podcasts. As with so many instances today one has to question whether this is truly AI or just a simple software update, but the word AI is now on the site and for that reason alone, our IT department makes sure we can’t access it. This is the real world. Both individual users and corporations are going to be very cautious when implementing AI. It will not go as quickly as the technology itself.

I was explaining this at a client meeting for which we met in person but some of the participants joined remotely. The meeting software had a glitch, so we were unable to hear any of the people who joined remotely. This is also the real world. Technology breaks. Everyone seems to know this except for the people who actually build the technology. Will AI be the one exception to this technology rule? Doubtful.

Finally, AI might very well be superior to human radiologists, and it may empower robots who are better surgeons. There is one thing that AI will never likely do better than humans, and that is care. Human surgeons sometimes struggle with emotion. Twice in my life I refused to let a surgeon operate on me because I did not trust them. If I get operated on in the future and have the choice between an AI robot and a human, I’m picking the human. AI may be more precise, but that human cares about me waking up afterwards. That matters; at least that is my perspective.

Warm regards,

Chuck Osborne, CFA

~AI is Coming for Your Job…or is it?